Retailers report slowing sales gains for February

NEW YORK (AP) — Americans cut back on spending in February as cold weather and economic challenges chilled their appetite for spring merchandise.

The nation's retailers on Thursday reported that sales slowed in February, a time when most stores get rid of winter merchandise and bring in swimsuits, ankle length pants and other spring fashions.

But Americans spent more judiciously during the month as they contended with an increase in the payroll tax of 2 percentage points, income tax refunds that came later than usual and rising gas prices. Winter storms throughout much of the country in February also likely made spring merchandise less appealing to them.

"February was a difficult month," said Ken Perkins, president of Retail Metrics LLC., a research firm. "Retailers faced significant headwinds."

February's tally reflects a drop in sales growth from January. Overall, 14 retailers reported on Thursday that revenue at stores open at least a year — an indicator of retail health — rose an average of 4.1 percent, according to the International Council of Shopping Centers, an industry trade group. That compares with a 5.1 percent increase in January, and a rise of 6.7 percent in February 2012.

But the latest results also mark a reduction in the number of stores reporting monthly revenue, including big names like Target, Macy's and Nordstrom. Wal-Mart, the world's largest retailer, hasn't reported on a monthly basis in years.

With the shrinking list, Costco, which posted a 6 percent gain in February, now accounts for about two-thirds of the tally. In total, the retailers that report monthly data represent about 6 percent of the $2.4 trillion in U.S. retail industry sales.

Among the companies that reported monthly results, the ones that cater to poor and middle-class shoppers said that Americans are still grappling with economic challenges. Many of them had to do heavy discounting to get shoppers to spend.

Bruce Efird, CEO of the discount chain Fred's, said delayed tax returns and the increase in payroll tax weighed on customer's spending patterns. Fred's reported that revenue fell 1.5 percent in February, more than the 1.3 percent drop Wall Street had expected. Fred's also lowered its fourth-quarter outlook due to markdowns and higher-than-expected costs.

Cato, a woman's clothing chain, also reported that February revenue dropped, by 3 percent compared with the 4 percent analysts had expected. The company said the figure reflects Americans' hesitance to spend right now.

"February sales reflect the continuing difficult economic environment. We did see some beneficial impact from the delay in tax refunds from January," said John Cato, CEO of Cato, a women's clothing chain.

Limited Brands Inc., which operates Victoria's Secret and has been on a strong winning streak, said economic challenges also hurt its business. The company said that it had to discount more heavily to bring in shoppers in February. The company said that profit margins also were squeezed.

Gap Inc., which started to see a turnaround gain momentum early last year, had a mixed performance. The retailer, which operates stores under its namesake, Old Navy and Banana Republic, posed a 3 percent increase that was higher than the 2 percent gain Wall Street analysts had estimated.

The measure rose 2 percent at Gap and 6 percent at Old Navy. But Banana Republic's revenue at stores opened at least a year fell 5 percent. The company said that customers thought the February merchandise was too spring-like for the month.